Manufacturing
Manufacturing in the Western world has faced structural challenges for decades, and the trend continues. Europe’s manufacturing sector remains under pressure, with industrial production in the EU falling by 2% in 2024, following a 1.4% decline in 2023. Germany and France—the region’s industrial engines—have seen persistent contractions, driven by high energy costs, weak global demand, and competition from Asia. Germany’s manufacturing output dropped 10 percentage points below pre-pandemic levels by late 2024, while France managed modest growth in pharmaceuticals and food production but still faces headwinds in automotive and machinery sectors. Rising input costs and supply chain disruptions linked to the Russia-Ukraine war have compounded these challenges, forcing European firms to rethink energy sourcing and invest in automation and green technologies to remain competitive.
Despite short-term rebounds—such as a 0.1% year-on-year increase in euro area industrial production in August 2024- the overall trend points to stagnation, with capital goods output falling by 7.5% in 2024 and motor vehicle production down 6.4%. Analysts warn that without significant investment in advanced manufacturing and clean energy infrastructure, Europe risks further deindustrialization.
In contrast, the Asia-Pacific continues to dominate global manufacturing. The region is projected to lead the smart manufacturing market, growing from $277.8 billion in 2022 to $754.1 billion by 2030, at a compound annual growth rate of 15.7%. China remains the world’s largest manufacturing economy, but its strategy has shifted from low-cost production to high-tech leadership under the Made in China 2025 initiative. This program, now in its second phase, emphasizes AI-driven automation, green energy integration, and advanced robotics, with over 80% of large Chinese manufacturers using AI-based systems to boost efficiency and reduce waste. Smart factory models like Haier’s COSMOPlat and Huawei’s FusionPlant exemplify this transformation, delivering 25% productivity gains and 30% waste reduction through AI and IoT integration.
India is emerging as a major manufacturing hub, supported by the Make in India initiative and Production-Linked Incentive (PLI) schemes targeting electronics, automotive, and semiconductors. Manufacturing accounts for 17.2% of India’s GDP, with government targets to raise this to 25% by 2030. Venture capital and foreign direct investment are flowing into India’s industrial sector, driven by supply chain diversification and cost advantages. Vietnam is also gaining traction, with its industrial production index surging 8.4% in 2024, the highest in four years, fueled by electronics, automotive, and textile exports.
The adoption of Industry 4.0 technologies—including AI, IoT, and robotics—is accelerating across Asia-Pacific. Predictive maintenance, autonomous systems, and digital twins are becoming standard in Chinese and Japanese factories, while Southeast Asian nations invest in cloud-based platforms and cybersecurity for smart manufacturing. These advancements are reshaping global supply chains, enabling mass customization and reducing reliance on low-cost labor.
Globalization has driven manufacturing shifts, but recent disruptions—including the COVID-19 pandemic, the Russia-Ukraine war, and the U.S.-China trade conflict—have exposed vulnerabilities. The trade war pushed global supply chains to a breaking point, with tariffs as high as 145% on Chinese goods by 2025, prompting multinationals to diversify production to Southeast Asia and Mexico. Supply chain resilience is now a strategic priority, with companies investing in nearshoring, digital risk management, and AI-driven logistics to mitigate geopolitical and climate risks.